OCR below 1% increasingly likely: Kiwibank
Kiwibank economists Jarrod Kerr and Jeremy Couchman believe Australia's rate cut, a planned cut from the Fed, and weak business confidence numbers could prompt the central bank to cut rates by more than 25 basis points over the remainder of the year.
The bank expects a cut in August, but says wholesale interest markets are pricing even sharper cuts. OIS rates currently hover at just under 1%, indicating traders expect the OCR to plunge to 1% or even lower by early 2020.
"Wholesale interest rates drifted lower last week, as the domestic data weakened and central banks offshore cut. We continue to expect the RBNZ to cut the OCR in August. The question is whether the RBNZ will need to do more. The need to cut the OCR to 1% and below, is becoming increasingly likely," the economists said.
The Kiwibank economists say New Zealand, Australia and other global markets even could be headed towards a "Japanification", echoing Japan where rates have stayed at around zero or below for decades.
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